Data
It’s become dogma that one of the most valuable assets of DTC is the data it delivers.
I had a boss many years ago, though, who told me there were two types of data: interesting and actionable. And DTC, in my experience, is best at delivering more of the former than the latter.
As CPG continues to weather a storm at macro and micro levels, we’re going to hear a more frequent chorus of “DTC is dying.” While we’re not here to pile on to that, we do think—and long-time readers of this newsletter have heard this before—that it’s worth questioning some of the accepted beliefs that are associated with building a CPG brand today. Part of that questioning, we believe, has to be the role (and importance) of first-party data.
To set the table, let’s be honest with ourselves from the jump: We don’t use a fraction of what we collect from customers. In fact, we probably don’t even know, fully, what we collect. Probably never will, either.
So, why is it valuable?
Much of the data is a more granular version of what we can already know from retail expansion, social media listening, and broad-based advertising. In cases where a brand launches DTC first, the DTC data is a stand in for that retail-specific data in order to pitch buyers. But it’s mostly the same, just a different level of specificity. We’ll stipulate that data helps, but, then again, plenty of brands launch retail first. So, maybe that’s a wash.
Perhaps the value is in the access to the data: If it’s easier to get and faster to review, maybe you can learn more about your customer faster? Maybe. But if we think about the data points that we’re likely to review—geography, likely income bracket, popular products, etc—much of that analysis needs a similar level of work as analyzing retail. So, maybe that’s a wash, too.
From where we sit, much of the data that is valuable is data that brings the convenience of DTC to some level of parity with retail for the consumer.
As we’ve written before, CPG brands who primarily go to market through DTC are often at a disadvantage. The channel can be “out of sight/out of mind” at the point of discovery or impulse, which removes the brand from the purchase equation. As we covered in Time, Revisited:
For Bezos and Amazon, time savings has to be up to 20X more than the alternative of driving to the store. Because a store offers more opportunities to discover new things. Stores are superior to Amazon in this way.
For Amazon, this matters from a pure market share perspective: getting people to buy singular items from Amazon, or to build their lists on Amazon, means the consumer has smaller lists for brick and mortar visits. Over time, the hope is this habit builds and reinforces itself: smaller lists mean less frequent trips, and less frequent trips mean more frequent purchases on Amazon. So on and so forth.
This dynamic also matters for brands selling DTC, but for a different reason: the DTC channel has to offer something—or some combination of things—that is likewise powerful enough to beat retail’s draw of discovery.
Time savings is, perhaps, one of those things.
We’re reminded of this topic because of a chart that Neil Saunders shared this week on planned and unplanned purchases and what those figures looked like at certain retailers.
At Trader Joe’s, for example, consumers reported that roughly half their purchases were fully planned. 30% were partially planned (roughly defined as planning to buy from the category, but not a specific brand) and another 20% were completely unplanned (no plan to buy from the category or brand).
In this example, if you’re a brand that lives in a category carried at Trader Joe’s and you have a high percentage of DTC customers who shop at Trader Joe’s, your focus is different than Amazon’s. You won’t be trying to remove the Trader Joe’s trips from your customers’ behaviors. Buy you do probably want your DTC customers topped off on your product before going to Trader Joe’s. You want to remove your category from the list—planned or not.
Otherwise, given that half a basket at Trader Joe’s is unplanned, there’s a pretty good chance that your product is getting replaced with a competitor on that next trip.
When that happens, it doesn’t mean your customer quit your brand or gave up on your product. It means the combination of immediate physical availability and a strong discovery engine runs so hot that it’s just easier for the customer to buy there.
Data, it seems, can play a role in pre-empting this. And saving a sale may be the most valuable component it can provide brands.